Norway’s central bank will force lenders to wean themselves off its deposit facility in an effort to spur interbank lending even as Europe’s debt crisis threatens to trigger a region-wide liquidity squeeze. “Norges Bank wants the banks to use each other more for placing their money,” Kari Due-Andresen, an analyst at Svenska Handelsbanken AB in Oslo and former economist, said in an interview. “But what the banks say is that at the moment the situation is so insecure and they are hoarding their own cash, so the new measures will just make things worse.” Norges Bank will impose a quota on bank reserves starting next month, seeking to cap the total amount left with the central bank at 45 billion kroner ($7.9 billion) a day in an effort to force lenders to rely on each other for funds and help reduce interbank spreads. That’s unlikely to work as the prospect of European bank losses amid a deepening debt crisis prompts lenders to shun the interbank market and forces spreads even wider, according to Due-Andresen. Reluctance amongst Europe’s banks to lend on the interbank market is the highest in more than 2 1/2 years, market rates indicate. The Euribor-OIS spread, the difference between the three-month European interbank offered rate and overnight index swaps, rose this week to 91 basis points, the highest since March 18, 2009, Bloomberg data show.
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Thursday, September 29, 2011
Norway’s central bank will force lenders to wean themselves off its deposit facility in an effort to spur interbank lending even as Europe’s debt crisis threatens to trigger a region-wide liquidity squeeze. “Norges Bank wants the banks to use each other more for placing their money,” Kari Due-Andresen, an analyst at Svenska Handelsbanken AB in Oslo and former economist, said in an interview. “But what the banks say is that at the moment the situation is so insecure and they are hoarding their own cash, so the new measures will just make things worse.” Norges Bank will impose a quota on bank reserves starting next month, seeking to cap the total amount left with the central bank at 45 billion kroner ($7.9 billion) a day in an effort to force lenders to rely on each other for funds and help reduce interbank spreads. That’s unlikely to work as the prospect of European bank losses amid a deepening debt crisis prompts lenders to shun the interbank market and forces spreads even wider, according to Due-Andresen. Reluctance amongst Europe’s banks to lend on the interbank market is the highest in more than 2 1/2 years, market rates indicate. The Euribor-OIS spread, the difference between the three-month European interbank offered rate and overnight index swaps, rose this week to 91 basis points, the highest since March 18, 2009, Bloomberg data show.
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2 comments:
it correct that taxpayers' money is only involved when the banks need capital?
Is the money for the stability Fund created by fractional reserve banking? That is created by a computer entry.
when we are told "we" will have to contribute to the euro bailout does the "we" mean private financial institutions operating out of London-many of which are partly or even wholly foreign owned?
If the money is being created by fractional reserve, then there is an alternative but it would mean returning banks to a useful function and curbing their power. It would be encouraging if the alternatives more widely discussed. At the moment politics seems to be about keeping the financial institutions happy
In a highly coordinated counter–attack primed to cause maximum embarrassment for officials in Athens, irate civil servants took over the premises of major ministries in a symbolic show of protest against the auditors' presence in the capital.
Blocking the entrance to the finance ministry hundreds of protestors shouting "take your bailout and leave" attempted to prevent the finance minister Evangelos Venizelos meeting the newly-arrived inspectors.
"We are sending a loud message to the government and the European Union that we've reached our limits, that it is the workers in our country and especially workers in the public domain who have carried the burden [of cost-cutting policies]," said Kostas Tsikrikas, president of ADEDY, the union of public sector employees.
After almost two years of relentless austerity the purchasing power of civil servants had been halved, he said. The union which represents some 800,000 civil servants said protestors would march on parliament at 6PM local time (4 PM BST).
"Total losses after the new 20 percent cut envisaged in the new pay scale [for public sector employees] exceed 50 percent," said Tsikrikas. "The measures that are being enforced are unfair and ineffective as all they do is lead to an increase in unemployment and deeper recession."
Greek civil servant wages were among the lowest in the OECD and it was "a myth" that they were draining the public sector, he added.
It is becoming increasingly hard to ignore the fact that society's most vulnerable are being hit hardest by the measures that have been meted out by the EU and IMF to reinvigorate the Greek economy
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